DNV GL © 2015 10 October 2017 SAFER, SMARTER, GREENERDNV GL © 2013
Assessing Appliance Markets and Opportunities: Postcards from Southern Africa
BECC – October 18, 2017
1 November 2017
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DNV GL – Joseph Lopes, Luisa Freeman
DNV GL © 2015 10 October 2017
The Research Team
SPONSOR: UNFCC Climate Technology Centre & Network (CTCN) United Nations Environment Programme
RESEARCH LEAD: United 4 Efficiency (U4E)
United for Efficiency (U4E) is a global initiative supporting developing countries and emerging economies to move their markets to energy-efficient appliances and equipment.
CONTRACTOR: DNV GL Energy
Headed by Gabriel Kroes in Cape Town, supported by SME’s Joseph Lopes and Luisa Freeman
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DNV GL © 2015 10 October 2017
Premise and Objectives
RESEARCH QUESTION: How can one best influence the more rapid adoption of higher efficiency models of appliances and lighting in societies dominated by low income households?
Consumer Barriers –
– Limited access to electricity, use of other fuels for primary functions
– Lack of knowledge and availability of products
– Inability to afford higher efficiency models even with incentives
Market Barriers –
– Limited access to electricity = limited market size
– Lack of domestic options = mostly imported models, high tariffs
– Too many small countries with lack of coordinated policies
Policy Barriers –
– How to balance electrification, reliability, efficiency, clean/renewable energy, and affordability
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DNV GL © 2015 10 October 2017
Scope, Countries and Technologies
Botswana
Lesotho
Malawi
Mozambique
Namibia
Swaziland
South Africa
Tanzania
Zambia
Zimbabwe
Lighting
Room air conditioners
Residential refrigerators
Distribution transformers
Electric motors
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Ten countries (SADD), five appliances
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Methodology
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Building on previous assessments with updates and more granularity
Secondary research via international and continental studies
In-depth interviews (IDIs) with key stakeholders in each country
– Government departments of trade, utilities, consumer advocacy groups, etc.
Missions took place August and September: two-person teams in each country
Surveys with electric consumer households in selected countries (ongoing)
– Use of local affiliates of international market research firms to address language and media challenges while adhering to need for consistent database
DNV GL © 2015 10 October 2017
Moving the market… or creating the market?
Barriers to market adoptionFor residential households: Lighting, Room A/C, Refrigerators
Limited availability of electricity, limited number of uses for those who have it
Lack of knowledge or experience with the appliances, especially efficiency aspect
For commercial and manufacturing concerns: Lighting, Motors
Lighting – mostly linear fluorescent, some CFL & incandescent
Motors are pretty ubiquitous, but they tend to be repurposed, rewound, repaired
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For utilities: TransformersTransformers have a limited market – one government owned utility per countryLimited distribution system in terms of geographic coverage
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Electrification by country
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Population, grid electrification (urban, rural, total) and electric prices for each of the 10 SADD countries
Electric prices are subsidized to varying degrees by country
CountryPopulation
(million)Grid-
connected %Urban Grid-
connected %Rural Grid-
connected %Res identia l price
(US$/kWh)Botswana 2 53% 69% 32% $0.065Lesotho 2.1 17% 43% 8% $0.093Malawi 17 12% 46% 5% $0.037Mozambique 27 40% 67% 27% $0.108Namibia 2.3 32% 50% 17% $0.142South Africa 54 86% 87% 85% $0.053Swaziland 1.3 65% 84% 60% $0.073Tanzania 52 30% 57% 18% $0.121Zambia 15 28% 62% 5% $0.021Zimbabwe * 15 40% 70% 30% $0.098
Low: under 35% under 50% under 20%Sources: IEA, World Bank Energy Outlook 2016, U4E
DNV GL © 2015 10 October 2017
Market Actors
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For market actors:
Product manufacturers and distributors tend to serve regional markets rather than individual countries
Limited domestic manufacturers
Difficulty in achieving market entry for higher efficiency units
High cost of shipping and transport where there are limited quantities
For governments:
Lack of consistency in trade policies among countries
High tariffs discourage imports
For electric distribution utilities:
Lack of data to understand end uses of electricity
Focus on electrification more important than attention to reducing peak demand
Conflicting goals with donor agencies regarding energy efficiency
Barriers to market adoption of high efficiency equipment and appliances
DNV GL © 2015 10 October 2017
Findings – Example: Lighting in Zimbabwe
What is the real opportunity for energy efficiency among households? In Zimbabwe, about 40% of the population.
For non-South Africa, access to electricity is still limited (31% weighted average)
Of those with access, use remains low
– (>5M HH with electricity don’t use electric lighting)
Government approach: ban incandescent lighting
What is needed to cause HH to adopt high efficiency bulbs, even with this mandate?
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ZIMBABWE% Number
Total Population 100% 16,346,405 Total Population% with Electricity 40% 6,538,562 60% are not connected to the grid
of these % with Incandescents 14% 915,399 Banned as of 2017…of those with Electricity % with CFLs 3% 171,905 Anticipated to increaseof those w/ Elec., % with no lighting 83% 5,427,006 No lighting even though connected to the grid
% w/o Electricity 60% 9,807,843 Not in market for any electric end uses
DNV GL © 2015 10 October 2017
Barriers to be overcome in these marketsIssues/Barriers
Lack of experience
Lack of awareness
Disinformation
Trust building
Addressing the bad stuff
Emphasize the good stuff
High Costs/Supply
Solutions Demonstration displays to see equipment in use
Education and info campaigns to explain value of EE
Myth-busting about unsubstantiated negative impacts
Use of testimonials, associations, trusted opinion leaders
Government ban on inefficient products (e.g., Zimbabwe, Thailand)
End user incentives, awards, recognition programmes
Favorable tariffs, Manufacturer/distributor incentives
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Cautions
Building expectations before supply chain can respond
Anticipating and addressing negative possibilities up front
Quality of product & black market issues
Ability to pay for resulting electric bills
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Findings from other research: Barbados
Leverage opinion leaders: Utility is well-respected and trusted source of information for influencing behaviour
Youth training can be effective tool to help increase awareness and understanding and thus influence behaviour
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Results: Survey questions on interest/awareness
20-Oct-2015
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9 or 10 Very interested 35.9%7 or 8 16.0%5 or 6 13.5%3 or 4 8.3%1 or 2 Not interested 26.3%
How Interested in Learning how to save energy in home (0-10 scale)
Moderate to high interest in learning about energy
About ¼ of residents not interested in learning
Residents are mostly interested in tips for energy savings
Some interest in incentives, audits and renewables
1/3 of residents not interested in information
Barbados Potential Study (DNV GL)
DNV GL © 2015 10 October 2017
Findings from other research: Egypt
Harmonization of Codes and Standards for Appliances
UNDP project - Middle Eastern Energy Regulators
– Convened MENA countries to identify ways to coordinate government policies, tariffs, codes and standards, financing and utility programmes
– Sought to build single regional certification and testing laboratory for certifying products and applying labels
– Met with manufacturers about barriers and how to overcome them
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DNV GL © 2015 10 October 2017
Findings from other research: ELI
Efficient Lighting Initiative (ELI) 2000 - 2005
7-country initiative of Global Environment Facility (GEF) to transform lighting markets included South Africa
– Governments keen on development of local manufacturing
– Codes and standards emphasized to keep suppliers honest, ensure quality
– Simple label concept: “Is it efficient? Yes or no.” transcends language issues across a region
– Harmonization of standards across a region builds impetus of international manufacturers to alter production lines to meet the demand
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DNV GL © 2015 10 October 2017
Electrification plus efficiency can work
South Africa implemented a “lifeline rate” strategy for expanding access to electricity to the country's disadvantaged communities.
The poorest households would get 50 kilowatt hours (kWh) of free electricity a month.
The challenge for ESKOM (the national utility) was to implement this project on a national scale without the benefit of increased electricity revenues.
ELI ESKOM provided households with two 15-watt CFLs, while reducing the allocation of free electricity to 40kWh.
Electricity use reduced by 20 percent, while the new customers gained 400 percent more light via their energy quota, thanks to the energy efficient bulbs.
Source: IFC ELI Final report
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DNV GL © 2015 10 October 2017
Bottom Line: Effective market creation and transformation of purchasing behaviours requires three things:
1: Integration
Integrate a full suite of initiatives to overcome multiple barriers
Consider multiple strategies:
– Removal of tariffs and import restrictions for high efficiency models
– Encouragement via codes and standards to level the field
– Augment government actions with utility incentive programmes for consumers and/or distributors
– Wrap it all around a consumer awareness campaign to build awareness and demand
– Facilitate group purchasing and innovative financing
2: Harmonization
Must build a market size of critical mass in order to effectively impact the supply chain
Share the burden to lighten the load; leverage resources across countries
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DNV GL © 2015 10 October 2017
And the most important…
3: Communication
Most important is to build a communications and outreach plan
You can build it, and they may come, but only if they know about it!
– This part is local, not regional
– Seek support of opinion leaders, popular figures
– Leverage trusted sources, e.g., churches, business associations, utilities
– Multimedia e.g., popular press, schools, demos
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Nelson Mandela participated in the ELI promotions in South Africa
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Staged Strategies for Transforming Purchasing Behavior of Energy Efficient Products
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DNV GL © 2015 10 October 2017
SAFER, SMARTER, GREENER
www.dnvgl.com
Thank you!
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Joseph S. LopesSenior Principal Consultant, DNV GL